Leading Indicators Down Sharply in March

May 17, 2001
--The University of San Diego's Index of Leading
Economic Indicators for San Diego County fell 1.2 percent
in March. All six of the components in the Index were
down during the month, with the biggest damage being done
by big drops in consumer confidence and local stock
prices. The other components--building permits, initial
claims for unemployment insurance, help wanted
advertising, and the outlook for the national
economydeclined by smaller amounts.

The USD Index of Leading Economic Indicators
is published under the auspices of the School of
Business Administration's Real Estate Institute.
For more information about the Institute, please
visit its Website at http://realestate.sandiego.edu

Index of Leading Economic
IndicatorsThe index for San Diego County that
includes the components listed below (March)Source: University of San Diego

- 1.2 %

Building PermitsResidential units authorized by building
permits in San Diego County (March)Source: Construction Industry Research
Board

- 0.47%

Unemployment InsuranceInitial claims for unemployment insurance
in San Diego County, inverted (March)Source: Employment Development Department

Consumer ConfidenceAn index of consumer confidence in San
Diego County (March)Source: San Diego Union-Tribune

- 2.78%

Help Wanted AdvertisingAn index of help wanted advertising in the
San Diego Union-Tribune (March)Source: Greater San Diego Chamber of
Commerce

- 0.51%

National EconomyIndex of Leading Economic Indicators
(March)Source: The Conference Board

- 0.50%

With the decline in March, the USD Index of
Leading Economic Indicators has now fallen or remained unchanged
for ten consecutive months. The drop of 1.2 percent in March was
the largest one month decline in the Index since January 1990.
All six of the components were negative, a situation that last
occurred in August of last year. However, the depth of the
decline was more severe in March than during last August, leading
the Index to fall by more than twice as much. The outlook for the
local economy continues to be for some difficulty in the second
half of 2001. That difficulty is expected to be manifested in a
higher unemployment rate xpected to peak between 3.5 and 4.0%)
and weaker housing and retail sales. Key factors to watch in
terms of their impact on the local economy are the health of the
national economy and the impact of the energy crisis (both
gasoline and electricity) during the summer months.

Highlights: After registering strong
gains on a year-to-year basis in January and February, residential
units authorized by building permits slumped in March.
Building permits were down 2.65% for the first quarter of 2001
compared to the same period in 2000. . . Initial claims for
unemployment insurance rose for the first time in six months
in March, which is a negative for the Index. The 14,541 claims
filed during the month was the highest monthly total in two
years. . . The other labor market component, help
wanted advertising, also fell during the month. However, the
labor market remains strong, with the county unemployment rate
still below 3% at 2.7% for April. . . Local stock prices
have now fallen for ten months in a row. . . On a seasonally
adjusted basis, consumer confidence has fallen over 25%
from its high reached in September 1999. . . Despite the
continued fall of the national Index of Leading Economic
Indicators, the longest economic expansion in U.S. history
continued in the first quarter of 2001, with Gross Domestic
Product expanding at a 2% annual rate. The five interest rate
cuts by the Federal Reserve, including another 0.5% on May 15,
may have forestalled a downturn that many economists had expected
in the first quarter. The cuts are also reduce the length and
severity of any decline in the national economy that does occur.

March's decrease puts the Index of Leading
Economic Indicators for San Diego County at 144.6, down from
Februarys reading of 146.8. There was a downward revision
in building permits for February, but this did not affect the
previously reported change of -0.4% for the month. The
fluctuations of the Index of Leading Economic Indicators for San
Diego County for the last year are given below: